‘The proposal that Threadneedle Street should have a productivity growth target would be the biggest change to the way the Bank of England operates since it was granted the power to set interest rates by Gordon Brown.’
Photograph: Toby Melville/Reuters

In normal circumstances, John McDonnell’s plan to shake up the Bank of England would be creating quite a buzz in Labour circles. The proposal that Threadneedle Street should have a productivity growth target as well as one for inflation would be the biggest change to the way the Bank operates since it was granted the power to set interest rates by Gordon Brown in 1997. These, though, are not normal circumstances. The political focus is on whether the government can get Brexit legislation through parliament, not on whether it is possible to give the Bank the task of raising Britain’s long-term growth rate. As the second anniversary of the EU referendum approaches, McDonnell might think it is time to move on, but the left as a whole is having trouble doing so. That’s unfortunate but indicative of a deep, and politically dangerous, conservatism.

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It wasn’t always this way. For at least the first two-thirds of the last century those on the political right were the gloomy ones, the ones fearful of change, the ones doing their best to cling on to the status quo.

It’s hard to say when, but at some point between the first oil crisis in the mid-1970s and the collapse of communism in 1989, that changed. Now it is the mainstream left – not just in Britain but across the developed west – that tends to view crises as fraught with danger rather than opportunities to shake things up. The optimists are to be found on the free-market right rather than on the social democratic left. What’s more, the left’s defensive posture is proving costly.

In contrast to the left in 2008, Franklin D Roosevelt in the 1930s relished having a fight with the big battalions of Wall Street. He stuck up for the little guy and made life easier for trade unions. He didn’t say that there was no real alternative to global financial capitalism and that those who didn’t like it would have to suck it up. America eschewed populism during the Great Depression, even though the economic pain caused by the slump was far more severe than that suffered after the financial crisis of a decade ago, because it had a progressive in the White House who said the only thing to fear was fear itself.

But that was then. The way of doing business for the old left was to identify a problem, come up with a solution and try it out. If the idea flopped, the answer was not to offer voters more of the same; rather it was to try something else.

This is the way the political right now operates, taking its lead from Milton Friedman’s view that only a crisis – real or perceived – produces real change. “When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”

‘ In the 1930s, Franklin D Roosevelt relished having a fight with the big battalions of Wall Street.’ Photograph: OFF/AFP/Getty Images

Once a crisis happened, Friedman said, it was vital to act quickly before “the tyranny of the status quo” took hold. That was Roosevelt’s approach in the 1930s and Labour’s approach in 1945. More recently, the left’s stock response to a crisis has been to huddle under the duvet and hope the problem goes away.

This was evident during the financial meltdown of 2008, a crisis that was as big a blow to the free-market right as the oil shock and stagflation of the 1970s were to the social democratic left. The fundamental difference between the two crises was that the free-market right, which had been waiting patiently for such a moment, seized the opportunity in the 1970s. It had an explanation for what had gone wrong and a set of radical, alternative policies.

The months that followed the collapse of Lehman Brothers in September 2008 was a winter of discontent for capital in exactly the same way as 1978-9 was a winter of discontent for Labour. Parties of the centre-left had the opportunity to put finance back in its cage – the way Roosevelt did in the 1930s – but flunked it.

Revulsion at the activities of the bankers meant there was a thirst for change, but the change never happened. There was a political vacuum filled by rightwing ideas: primarily that the crisis was the result of too much public borrowing and that the solution was therefore a period of austerity. The timidity of the left meant that the wrong ideas were promulgated and the wrong people were punished.

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For Britain – and the rest of the EU, for that matter – it has been business as usual in the decade since the financial crisis. In the eurozone, austerity has been accompanied by an erosion of collective bargaining rights, a dilution of labour protection, privatisation and deindustrialisation. By the time of the EU referendum in June 2016, the UK had experienced a lost decade in which wages and productivity had flatlined, the gap between London and the rest of the country was wide and getting wider, and the economy was being supported by one of its recurrent housing bubbles.

McDonnell gets all that. He is a long-standing critic of the drift towards neoliberalism in the EU and knows that he wouldn’t be shadow chancellor were it not for the state of the UK economy. His challenge is to persuade voters that a Labour government led by Jeremy Corbyn would not be blown away by the financial markets.

The conviction that there were strict limits on what parties of the left could achieve was the main reason why the party embraced globalisation under Tony Blair, and for the pessimists of the left, these financial constraints are as strong as ever. They see so no possible way in which Britain could make a success of Brexit with different policies in place, and want a deal as close to the status quo as possible. But be in no doubt: the status quo is a failing Britain as part of a failing EU. The financial crisis of 2008 was the first opportunity to come up with an alternative to an economic model that clearly wasn’t working. Brexit is the second opportunity. There may not be a third. If the left fails to come up with a plan for real change the right surely will.

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